Control Your Assets or Someone Else Will

Last Updated (Monday, 28 July 2008)
Written by Hank Brock

First, and most important, planning is control. You want to determine who will get what, how they will get it, and when they will get it.

How are assets distributed? Let's look at an example. Robert, whose children were grown and gone, decided that the simplest thing he could do was leave 100 percent of his assets to his wife, Ann. He figured she'd take care of distributing things fairly among their children.

What happened? Robert died unexpectedly at the age of 58. Ann was only 53. She remarried, and took 100 percent of Robert's assets with her.

Eighteen years later Ann died, leaving all her assets to her second husband. Twelve years later he died, leaving all his assets-which now included Robert's original assets-to his children. Remember: These are people Robert never even knew existed.

What about Robert's children? In essence, they were disinherited. That's clearly not what Robert had intended, but the way he designated his assets be distributed, that's exactly what happened. Think that doesn't happen very often? Think again. It's actually quite common.

So, how are your assets distributed to your intended heirs after you die? Your assets will probably go through probate, either by the operation of law or because their trust was not set up properly. Many people think that just because they've prepared a will, their assets won't go through the expense and delay of probate. Nothing could be further from the truth.

All wills must be presented to the probate court. The court determines whether the will is valid. The court, considering what is written in the will, and then makes the final determination as to how assets (and minor children) are to be distributed to heirs (or guardians).

Your will may not necessarily have the final say. The probate judge does.

In certain cases, your assets will be distributed by "operation of law." That could happen, for example, if property was held by you and your spouse in joint tenancy with rights of survivorship. It could also happen if you've named a specific beneficiary-through a life insurance policy, retirement plan, tax-sheltered annuity, pension, or profit-sharing plan.

In those cases, your assets pass directly to the beneficiary you designated. Your assets may also be distributed by operation of law if you die without a will. In that situation, you're considered to have died "intestate." In essence, the state in which you live writes your "will" for you. Often, your state's "will" can be quite onerous. Consider the following "will" which contains some typical provisions, and which may be applicable to you.

On the surface, this may make sense. But examining further, does it really? For example, your children are either older or younger. If they're grown and gone, do you want two-thirds of your assets going to them rather than your spouse? If they're young children at home, do you want your spouse having to account to them for what he or she is doing with their money? The questions go on ...

You should also be aware that mutual funds, CDs, real estate, checking accounts, savings accounts, vehicles, stocks, bonds, and many other assets normally do not pass according to the operation of law but will go through the probate process.

The message here is clear: Do something about your estate plan. Don't let money stop you. A reputable attorney will usually prepare a simple will for $125 to $200. Don't rely on the will and trust "kits" offered for $10 on late-night television and in magazines. The court may consider them valid, but you will have forfeited the professional counsel you deserve.

Why is professional counsel so important? Assume that you go to the library and read an article on tonsillectomy. From that article, you figure out how to perform a tonsillectomy. Then you decide that you can do it easily and for much less money than a surgeon charges for the procedure. So you go to the bathroom mirror, open wide, and go to work.

Are you properly trained? Hardly. Can you perform a proper tonsillectomy? No way. So what makes you think you can properly interpret all the complicated estate laws from a $10 do-it-yourself kit?

Even if you're a surgeon who is completely trained in performing tonsillectomies, you're not going to do one on yourself. You'll hire another surgeon to do it for you.

The following excerpt was taken from "Your Complete Guide to Money Happiness." For more information on Hank's book visit our Recommended Reading page...

Hank Brock is President of Brock and Associates, LLC and author of "Your Complete Guide to Money Happiness." For almost 30 years Hank has been providing sound estate planning advice.

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